LBRY Inc – the firm responsible for developing the LBRY protocol – has announced it will close operations after receiving a final judgment in its case with the U.S. Securities and Exchange Commission (SEC) on Tuesday.
Since the announcement, LBRY token (LBC) has collapsed 14% in value.
A federal judge sided with the SEC in ruling that LBRY violated Section 5 of the Securities Act of 1933 in its issuance of LBC.
As such, it has permanently restrained and enjoined from further issuance of any “security” unless registered with the commission in advance.
LBRY is also required to pay a $111,614 fee for its violation within the next thirty days. This is a massive reduction from the SEC’s original fee request, which was $22 million
Over Twitter, LBRY confirmed that it will be completely winding down its operations, with the community free to decide how to make use of its LBC token.
The final judgement in SEC vs LBRY is out.
In accordance with the court’s order and our promises, we expect to spend the next several months winding LBRY Inc. down entirely.
As to what happens to LBRY from here, well, that’s up to you. pic.twitter.com/cU8O3nATT6
— LBRY (@LBRYcom) July 11, 2023
LBRY is a decentralized content platform known for its video-sharing platform, Odyssey. The platform leveraged LBC as the internal currency with which creators could charge viewers for streaming their content, or earn tips.
Throughout the case, the SEC noted that one of LBRY’s explicitly stated uses for LBC was to “financially support its operations,” which is one of the hallmarks of a security under the Howey Test.
Ultimately, Judge Paul Barbadoro ruled in November that “no reasonable trier of fact could reject the SEC’s contention that LBRY offered LBC as a security.”
The case is thought to set a dangerous precedent for other crypto creators, who fear their token issuance models may have been illegal in the SEC’s view.
In June, the agency alleged that multiple top cryptos were securities in a lawsuit against Coinbase, including Cardano (ADA), Solana (SOL) and Polygon (MATIC).
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